How the utility sector can reduce costs through customer-centric digital transformation

Article first published in Utility Week November 22, 2019.

Every year, UK utility companies spend more money on outsourcing customer services. In the second quarter of 2019, the industry was the most active buyer in the private sector, accounting for agreements worth £284 million. The sector is spending in excess of £500m on outsourcing a year, but is the money being spent wisely?

Enhancing customer service and reducing the ‘cost to serve’ are two key challenges the utility sector is facing – innovating customer communications is one way to tackle them both. Digitally-comfortable consumers are more willing than ever to manage aspects of their life, including utility bills, through their phone and online. Energy and water industries must embrace a customer-centric digital transformation approach to save money, while treating customers fairly by communicating with them in the way they expect.

Digital transformation, however, is not an overnight process and the utility sector will need help to transition.

Communication is key to treating customers fairly

Ever since the Financial Conduct Authority introduced the Treating Customers Fairly (TCF) outcomes in 2007, the obligation for organisations to demonstrate that they are treating their customers fairly has grown. Utility companies are no different, with their TCF policies readily available online while Ofgem and Ofwat both incentivise for how companies treat customers.

Three of the TCF outcomes have how companies communicate with their customers at their core. At the same time, customers expect information to be relevant and easily understood. Customer-centric digital transformation is a must for the utility sector.

Personalised digital migration driven by data

Accurate information tailored to the individual requirements of each customer through data segmentation is essential to customer-centric digital transformation. This puts the consumer at the heart of all communications whilst also increasing response rates because information is relevant and timely.

In the utility sector, many new energy companies now only communicate with their customers via email and SMS and the goal for all utility firms should be to migrate as many of their communications to digital channels as they can. 83 per cent of people say it’s easier to respond to email so communicating[1] with customers via their preferred method, be that SMS, email or a combination of both will not only reduce costs but also increase customer engagement and, therefore, will increase revenue.

Channel optimisation through behavioural nudges

As well ensuring that communications are delivered via the right channel, message engagement through behavioural nudges also reduces cost. Innovations like digital stamp printing on envelopes as opposed to just franked postage has been shown to be more trusted by consumers and results in greater engagement.

The utility sector also has the challenge to help consumers reduce bad debt – and the design of customer communications can play a crucial role in this. Digital communications and eye-tracking data can ensure that key information like how much a customer owes and how to pay is positioned where it will have most impact. This in turn reduces the need for customers to contact companies and reduces cost further.

Unwanted customer contact costs the industry and is another metric by which regulators assess companies. Investing in smart customer communications management and optimising channels reduces queries and complaints handling and allows companies to engage with customers via dynamic content, and gives them access when and how they want.

Reducing the cost to serve through innovation

As digital communication continues to grow in popularity, the costs of traditional communication methods are facing greater scrutiny despite their potency. The cost of postage has risen by 9% in the last 12 months alone and will rise by 5-6% in January 2020[2].

Challenging the mindset of ‘we have always done it that way’ can be difficult in the utility sector. However, smarter planning and innovation to existing systems can save huge amounts of money.

Research shows that inbound mail items can be handled up to 19 times[3] before they are received by the end recipient, which is costly and a waste of human resource. Innovative digital information capture technologies and document management services allow crucial information to be extracted at source when received, stored digitally and transmitted to companies’ systems directly. This avoids unnecessary handling and risk of loss or damage, as well as reducing cost.

Utility companies frequently have to communicate emergency and seasonal initiatives e.g. flood warnings and summer water saving to winter fuel readiness. Such ad-hoc customer communications are often overlooked as an area where significant savings can be made.

Web-based hybrid mail solutions enable letters that would normally be printed via local desktop or office printers to be produced and mailed from a supplier’s facilities, qualifying them for the maximum postal discount possible, regardless of volumes sent.  When considered alongside the cost of consumables needed, hybrid mail can offer clients savings of up to 60 per cent[4].

Utility companies also have a responsibility to reduce their impact on the environment. Digital transformation and the streamlining of communication channels can go along way to reducing environmental impact as well as cost. The impact of traditional printed customer communications can also be reduced though the use of innovative products. French envelope manufacturer Pocheco, for example, have recently developed a fully recyclable and biodegradable window envelope.

Traditional post still has a part to play

Digital transformation does not signal the death knell for print communications – far from it. A multi-channel, customer-centric approach does not mean digital first nor physical communication first. Instead, a ‘channel of choice’ ecosystem should be encouraged.

Campaigns that utilise both print and digital channels  see a 27 per cent sales increase[5] when compared to print or digital only. There is also a time when certain documents need to be printed and sent as hard copies. 57 per cent of people still feel more valued through receiving a letter[6]. Despite these facts, cost savings for printed post are still being forgotten by utility companies.

Utility companies can reduce postage costs by working with suppliers who can offer discounts on postage options because of the volumes they post. Savings can also be made through paper choice and the merging of print work streams.

Time to save

The utility sector has several key challenges to face. Enhancing customer service, reducing the cost to serve, reducing bad consumer debt and mitigating environmental impact are all issues companies have to improve upon. The digital consumer expects to be treated fairly and most importantly communicated with in the way that they prefer.

Customer-centric digital transformation which provides an optimised multi-channel approach is one way in which utility companies will be able to satisfy those expectations, reduce the significant costs of outsourcing and, most importantly, prosper in a highly competitive market.

 

Using Adare SEC’s multi-channel delivery solutions, utility companies can communicate with their customers using a combination of email, SMS and print, using their customers preferred channel to increase customer engagement and return on investment.

For more information, please email Ben.Young@adaresec.com or visit www.adaresec.com

 

[1] Royal Mail Market Research, 2014

[2] Adare SEC, June 2019

[3] PWC, 2016

[4] Adare SEC 2019

[5] Royal Mail, 2014

[6] Royal Mail, 2014